ExxonMobil plans $ 1 bn in diesel refining upgrades

ExxonMobil will spend more than $ 1 bn to boost output of "clean diesel" fuel at three oil refineries, including its huge complex in Baytown, to meet upcoming US regulations and feed rising diesel demand globally, the company said.
The projects-also slated for facilities in Baton Rouge, Louisiana, and Antwerp, Belgium, will upgrade existing equipment and add 6 mm gallons per day of production capacity, increasing the company's worldwide diesel output by 10 %. It will also improve the Irving-based oil giant's competitive position in diesel, usage of which is expected to grow much faster than gasoline in coming years, primarily due to growth in the developing world.

With the projects, ExxonMobil will produce about 8 % of the world's diesel supply, up from 7 % today, said Sherman Glass, president of ExxonMobil Refining and Supply.
"We think this is significant because, in our view, it reinforces our ongoing commitment to meet the needs of the marketplace," he told. Other major refiners, including ConocoPhillips and Valero Energy, recently announced plans to delay or cancel refinery expansions. Volatility in commodity and capital markets are partly to blame, while a historic decline in gasoline usage in 2008 also has raised doubts about demand for petroleum-based fuels.

But ExxonMobil said despite near-term challenges, long-term forecasts still support a strong demand for diesel.
"We're seeing globally demand for diesel growing much more strongly than gasoline, about 3 % per year, whereas in gasoline we're looking at between flat and 1 %," Glass said.

The faster growth rate stems largely from China, India, and some other nations whose economies have exploded in recent years, creating the need for construction trucks, public transportation and trains that all require diesel. And in Europe, motorists are also turning more to diesel for personal vehicles.
In the US, where only 2 % of the passenger car fleet is diesel, the fuel represents about 20 % of petroleum consumption, while gasoline is closer to 45 %. In most countries, the balance is in favour of diesel.

Rising global diesel demand has kept diesel prices high despite a drop of more than $ 100 a barrel in crude prices in 2008 that has cut gasoline prices to less than half their $ 4-plus peak this summer. The average national price for diesel was $ 2.57 a gallon, versus $ 1.67 a gallon for gasoline, according to AAA's Daily Fuel Gauge survey. The Houston averages were $ 2.45 for diesel and $ 1.50 for gasoline.
ExxonMobil's projects also come as oil companies in the US are being required to upgrade refineries to produce ultra-low sulphur diesel fuel that the industry calls clean diesel. A 15 parts per mm diesel sulphur specification that went into effect in 2006 has removed more than 99 % of the sulphur in diesel fuel. When used in new diesel engines, the fuel significantly reduces tailpipe emissions.

Federal regulations demand that refiners exclusively produce the cleaner diesel by 2010. The upgrade projects will convert the last of Exxon's remaining US diesel output to clean diesel but also increase production of it, Glass said. In Baytown, a new desulfurization unit will add 65,000 gallons per day of capacity, while a similar unit in Baton Rouge will add 90,000 gallons per day, he said.
ExxonMobil expects to begin installing the units in 2009 and have them running by the end of 2010. During the projects, about 500 temporary construction jobs will be created in Baton Rouge and another 1,000 in Baytown. The company also is likely to add a small number of permanent jobs at the refineries to operate the units and perform maintenance, Glass said.